Which of the following is NOT a potential expo- sure of the FRS? a. a defective audit trail b. general ledger accounts that are out of balance with subsidiary accounts c. unauthorized access to the check register d. unauthorized access to the general ledger
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Which of the following is NOT a potential expo- sure of the FRS?
a. a defective audit trail
b. general ledger accounts that are out of balance with subsidiary accounts
c. unauthorized access to the check register
d. unauthorized access to the general ledger
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- Which of the following statements is NOT correct? a. EAMs capture transactions during processing without removing the application from service. b. EAMs support continuous monitoring of controls. c. EAMs have the potential to corrupt corporate databases d. EAMs decrease operational performance. e. All of the above are correct statements.In which of the following circumstances would an auditor expect to find that an entity had implemented automated controls to reduce risks of misstatement?a. When errors are difficult to predict.b. When misstatements are difficult to define.c. When large, unusual, or nonrecurring transactions require judgment.d. When transactions are high volume and recurring.When an audit team does not receive a response on a positive accounts receivable confirmation, auditors should do all of the following excepta. Send a second request.b. Do nothing for immaterial balances.c. Examine shipping documents.d. Examine client correspondence files.
- Explain the difference between an attribute and an exceptioncondition. State the exception condition for the audit procedure: The duplicate salesinvoice has been initialed indicating the performance of internal verification.When completing the audit of internal controls for an issuer, the severity of an internal control deficiency depends ona. Whether there is a reasonable possibility that the company’s controls will fail to prevent or detect a misstatement of an account balance or disclosure.b. Whether a misstatement has actually occurred as a result of the deficiency.c. The magnitude of the potential misstatement resulting from the deficiency or the deficiencies.d. Both a and c are correct.e. All of the above are correct.the susceptibility of an account balance or class of transactions to misstatements that could be material, individually or when aggregated with misstatements in other balances or classes, assuming that there were no related internal control is called : Select one: a. control risk b. audit risk c. detection risk d. inherent risk
- Which of the following is an incorrect statement? a. The amount of audit work should vary inversely with the likelihood of material misstatements existing in the accounting records. b. The better the organization’s control structure, the less likely it is that material misstatements will be present c. Complex or unusual transactions are more likely to be recorded in error than recurring or routine transactions are d. If misstatements are likely to occur in the recording process, the auditor should develop procedures to detect misstatements.Which of the following statements is FALSE?A. Irregularities are intentional misrepresentations associated with the commission of a fraudB. Errors are unintentional mistakesC. Data conversion provides safe storage for the off-line data files. These files could be backups or current data files.D. Before the auditor can determine the nature and extent of the tests to perform he or she must gain a thorough understanding of the client’s businessWhich of the following statements is associated with analytical procedure test? a. It helps to identify the errors in journal and ledger. b. It helps to test the internal control system. c. It helps to study the comparison of relationships among balance sheet accounts. d. It helps to discover detailed misstatements in the financial statements.
- The likelihood that material misstatements may have entered the accounting system and notbeen detected and corrected by the client’s internal control is referred to asa. Inherent risk.b. Control risk.c. Detection risk.d. Risk of material misstatement.Which of the following best describes the reason why an independent auditorreports on financial statements?(1) A misappropriation of assets may exist, and it is more likely to be detected byindependent auditors.(2) Different interests may exist between the company preparing the statementsand the persons using the statements.(3) A misstatement of account balances may exist and is generally corrected as theresult of the independent auditor’s work.(4) Poorly designed internal controls may be in existenceFollowing are examples of control deficiencies that may represent significant deficiencies or material weaknesses. For each of the following scenarios, indicate whether the deficiency is a significant deficiency or material weakness. Justify your decision. a. During its assessment of ICFR, the management of Lorenz Corporation and its auditors identified the following control deficiencies that individually represent significant deficiencies: • Inadequate segregation of duties over certain information system access controls. • Several instances of transactions that were not properly recorded in subsidiary ledgers. While the transactions that , weren’t recorded properly were not material, the gross amount of the transactions of that type totaled up to an amount several times materiality. • A lack of timely reconciliations of the account balances affected by the improperly recorded transactions. b. During its assessment of ICFR, management of First Coast BankCorp and its auditors…
